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For the following questions assume the following facts: (1) Balance of Payments = 0 prior to the transactions. (2) Person A (who lives in the United States) purchases an airplane from British Airways for $150,000. (3) Person A pays with a check from his account at First Union Bank in the United States. (4) British airways, since it will need dollars in 1 month, deposits the check at the Bank of England. (5) Bank of England deposits the $150,000 at Commonwealth bank, which is located in the United States. Due to the transactions above, what are the effects on the reserve at the Fed?
A.
Fact 2 is a decrease of $150,000, fact 5 is a decrease of $150,000, a net effect of -$300,000.
B.
Fact 3 is a decrease of $150,000, fact 5 is an increase of $150,000, a net effect of 0.
C.
Fact 3 is an increase of $150,000, fact 5 is a decrease of $150,000, a net effect of 0.
D.
Both fact 3 and fact 5 result in increases of $150,000, a net effect of +$300,000.
E.
Both fact 3 and fact 5 result in decrease of $150,000, a net effect of -$300,000